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Bank sector downgraded on housing concern

Bank sector downgraded on housing concern ( WFC C BAC JPM USB STI PNC BK COF BBT ) (by Alistair Barr)

SAN FRANCISCO (MarketWatch) -- The U.S. bank sector was downgraded to negative from neutral Thursday by the IRA Advisory Service on concern about renewed weakness in the housing market. "The outlook for housing in 2011-2012 is grim at best," said Christopher Whalen, managing director at Lord, Whalen LLC, which produces the IRA Advisory Service. "Most of the large banks with significant servicing operations in our coverage group are still not yet at the peak of home foreclosures." Residential and commercial property in the exurbs of cities like New York, Boston and Washington will likely come under renewed downward price pressure as 2011 proceeds, partly because gasoline prices are close to $5 a gallon, Whalen added in a note to clients. Many bank forecasts for revenue, profit and credit costs assume that house prices will rebound in the second half of 2011, he noted. If that doesn't happen, bank revenue and earnings could stay under pressure for most, if not all, of 2011 and 2012, Whalen explained. "Our worry for the next 12 months is that in addition to flat to down revenue and narrowing margins, the U.S. banking industry could see an increase in credit expenses," Whalen wrote. "The Street is not anticipating such an eventuality."